MDU Resources (MDU) - 2025 Q2 - Quarterly Report

Definitions This section provides definitions for key terms and abbreviations used throughout the financial report Introduction MDU Resources Group, Inc. operates as a pure-play regulated energy delivery company, focusing on its CORE strategy after the Everus spinoff - Company's 'CORE' strategy prioritizes customers and communities, operational excellence, returns focused initiatives and an employee driven culture[17] - Completed the tax-free separation of Everus, its former construction services business, on October 31, 2024, making Everus an independent, publicly-traded company[18] - As of June 30, 2025, the Company is organized into three reportable business segments: electric, natural gas distribution, and pipeline[19] Part I -- Financial Information This section presents the unaudited consolidated financial statements and management's discussion and analysis of the Company's financial performance Item 1. Financial Statements This section presents the unaudited consolidated financial statements, reflecting continuing operations after the Everus separation Consolidated Statements of Income This section presents the Company's consolidated revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Income (Unaudited) - Key Figures | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $351,186 | $344,471 | $1,026,019 | $932,746 | | Operating income | $30,332 | $39,574 | $143,195 | $136,230 | | Income from continuing operations | $14,177 | $20,242 | $96,644 | $94,977 | | Discontinued operations, net of tax | $(397) | $40,194 | $(899) | $66,357 | | Net income | $13,780 | $60,436 | $95,745 | $161,334 | | Basic EPS - Continuing Operations | $0.07 | $0.10 | $0.47 | $0.47 | | Basic EPS - Discontinued Operations | — | $0.20 | — | $0.32 | | Basic EPS - Total | $0.07 | $0.30 | $0.47 | $0.79 | - Net income decreased by $46.7 million for the three months and $65.6 million for the six months ended June 30, 2025, primarily due to the absence of income from discontinued operations[25][130][131] Consolidated Statements of Comprehensive Income This section details the Company's net income and other comprehensive income components for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income | $13,780 | $60,436 | $95,745 | $161,334 | | Other comprehensive income | $120 | $139 | $312 | $213 | | Comprehensive income attributable to common stockholders | $13,900 | $60,575 | $96,057 | $161,547 | - Other comprehensive income for the six months ended June 30, 2025, increased to $312 thousand from $213 thousand in the prior year, driven by higher net unrealized gains on available-for-sale investments[27] Consolidated Balance Sheets This section presents the Company's consolidated assets, liabilities, and equity at June 30, 2025, June 30, 2024, and December 31, 2024 Consolidated Balance Sheets (Unaudited) - Key Figures | Metric | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Total current assets | $441,926 | $1,397,039 | $666,259 | | Net property, plant and equipment | $5,434,557 | $5,146,669 | $5,344,292 | | Total assets | $6,945,917 | $7,960,336 | $7,038,818 | | Total current liabilities | $594,791 | $1,149,859 | $678,598 | | Total noncurrent liabilities | $3,619,222 | $3,792,673 | $3,669,646 | | Total stockholders' equity | $2,731,904 | $3,017,804 | $2,690,574 | - Total assets decreased by approximately $1.01 billion from June 30, 2024, to June 30, 2025, largely due to the absence of discontinued operations assets[30] - Total current assets decreased by $955.1 million from June 30, 2024, to June 30, 2025, primarily due to the removal of current assets of discontinued operations ($859.9 million)[30][45] Consolidated Statements of Equity This section details changes in the Company's consolidated stockholders' equity for the six months ended June 30, 2025 and 2024 Consolidated Statements of Equity (Unaudited) - Key Figures | Metric | December 31, 2024 ($ thousands) | March 31, 2025 ($ thousands) | June 30, 2025 ($ thousands) | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $2,690,574 | $2,743,136 | $2,731,904 | | Net income (Q2 2025) | N/A | $81,965 | $13,780 | | Dividends declared on common stock (Q2 2025) | N/A | $(26,765) | $(26,770) | - Retained earnings decreased from $1,363.6 million at June 30, 2024, to $1,071.9 million at June 30, 2025, reflecting the impact of discontinued operations and dividend payments[32] Consolidated Statements of Cash Flows This section presents the Company's consolidated cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows (Unaudited) - Key Figures | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $334,884 | $301,569 | | Net cash used in investing activities | $(174,417) | $(235,964) | | Net cash used in financing activities | $(168,570) | $(48,142) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(8,103) | $17,463 | | Cash, cash equivalents and restricted cash - end of period | $58,801 | $94,438 | - Net cash provided by operating activities increased by $33.3 million, largely due to the collection of purchased gas cost balances at the natural gas distribution business[34][190] - Net cash used in financing activities increased by $120.4 million, primarily due to lower issuance and higher repayment of long-term debt[34][192] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, offering additional context and information Note 1. Basis of presentation Interim financial statements adhere to GAAP and Form 10-Q, with Everus results reclassified as discontinued operations after its October 2024 separation - Interim financial statements are unaudited and prepared in accordance with GAAP for interim financial information and Form 10-Q instructions[35] - The separation of Everus on October 31, 2024, was a tax-free spinoff, with its historical results presented as discontinued operations[36] - Certain transmission-related expenses for 2024 were reclassified from operation and maintenance to electric fuel and purchased power, with no effect on reported results or cash flows[38] Note 2. New accounting standards The Company is evaluating the impact of new accounting standards, including ASU 2023-09, ASU 2024-01, and ASU 2024-03, on future financial reporting Recently Issued Accounting Standards Not Yet Adopted | Standard | Description | Effective Date | Impact on Financial Statements/Disclosures | | :--- | :--- | :--- | :--- | | ASU 2023-09 (Income Taxes) | Improves income tax disclosures, primarily related to rate reconciliation and income taxes paid. | Annual reporting periods beginning after 2024. | Currently evaluating impact on disclosures for year ended December 31, 2025. | | ASU 2024-01 (Stock Compensation) | Provides an example for applying scope to determine if profits interest and similar awards are stock compensation. | Fiscal years beginning after December 15, 2024. | Currently evaluating impact on disclosures for year ended December 31, 2025. | | ASU 2024-03 (Disaggregation of Income Statement Expenses) | Improves disclosures about a public business entity's expenses, providing more detail on types of expenses (e.g., purchases of inventory, employee compensation, depreciation). | Annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. | Currently evaluating impact on disclosures for year ended December 31, 2027. | Note 3. Discontinued operations The Company completed the Everus separation on October 31, 2024, with its historical results now presented as discontinued operations, net of tax - Everus separation completed on October 31, 2024, as a tax-free spinoff, with stockholders receiving one share of Everus for every four shares of Company common stock[41] - Historical results of Everus are presented as discontinued operations, net of tax, except for certain allocated general corporate overhead costs[42] Discontinued Operations, Net of Tax | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $— | $703,074 | $— | $1,328,624 | | Operating (loss) income | $(429) | $50,011 | $(1,028) | $89,302 | | Discontinued operations, net of tax | $(397) | $40,194 | $(899) | $66,357 | - Separation-related costs incurred were $45 thousand (3 months) and $547 thousand (6 months) net of tax for 2025, significantly lower than $3.9 million and $7.4 million in 2024[44] Note 4. Seasonality of operations The Company's operations are highly seasonal, causing significant quarterly fluctuations in revenues and expenses, making interim results non-indicative of full-year performance - Company's operations are highly seasonal, causing significant fluctuations in quarterly revenues and expenses[46] - Interim results may not be indicative of full fiscal year performance due to seasonality[46] Note 5. Receivables and allowance for expected credit losses Receivables are mainly trade receivables, with the allowance for expected credit losses determined quarterly based on historical data and forecasts - Receivables are primarily trade receivables from goods and services, due within 12 months[47] - Allowance for expected credit losses is determined quarterly using historical data, current conditions, and future forecasts[48] Allowance for Expected Credit Losses (in thousands) | Segment | At December 31, 2024 ($ thousands) | Current Expected Credit Loss Provision (6 months ended June 30, 2025) ($ thousands) | Less Write-offs (6 months ended June 30, 2025) ($ thousands) | Credit Loss Recoveries (6 months ended June 30, 2025) ($ thousands) | At June 30, 2025 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Electric | $473 | $1,117 | $1,369 | $240 | $461 | | Natural gas distribution | $1,366 | $2,062 | $2,271 | $417 | $1,574 | | Pipeline | $— | $— | $— | $— | $— | | Total | $1,839 | $3,179 | $3,640 | $657 | $2,035 | Note 6. Inventories and natural gas in storage Natural gas in storage is valued at the lower of cost or market using LIFO, average cost, or FIFO, with current inventories totaling $19.713 million - Natural gas in storage is valued at lower of cost or market using LIFO, average cost, or FIFO methods[50] Inventories on Consolidated Balance Sheets (in thousands) | Inventory Type | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Natural gas in storage (current) | $14,937 | $16,363 | $40,073 | | Fuel stock | $4,776 | $4,799 | $4,867 | | Total | $19,713 | $21,162 | $44,940 | - Noncurrent natural gas in storage, representing gas for pressure levels, was $48.5 million at June 30, 2025[50] Note 7. Earnings per share Basic EPS is net income divided by weighted average shares, diluted EPS includes equity awards, with continuing operations EPS consistent but total EPS down due to discontinued operations - Basic EPS is net income divided by weighted average common shares outstanding; diluted EPS includes dilutive equity awards[51] Earnings Per Share (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS - Continuing Operations | $0.07 | $0.10 | $0.47 | $0.47 | | Basic EPS - Discontinued Operations | — | $0.20 | — | $0.32 | | Basic EPS - Total | $0.07 | $0.30 | $0.47 | $0.79 | | Diluted EPS - Continuing Operations | $0.07 | $0.10 | $0.47 | $0.47 | | Diluted EPS - Discontinued Operations | — | $0.20 | — | $0.32 | | Diluted EPS - Total | $0.07 | $0.30 | $0.47 | $0.79 | | Weighted average common shares outstanding - basic (thousands) | 204,331 | 203,888 | 204,237 | 203,834 | | Dividends declared per common share | $0.1300 | $0.1250 | $0.2600 | $0.2500 | Note 8. Revenue from contracts with customers Revenue is recognized upon performance obligation satisfaction, disaggregated by customer type, with total external operating revenues increasing to $1,026.019 million for the six months ended June 30, 2025 - Revenue is recognized when control over a product or service is transferred to a customer, based on contract consideration[52] Total External Operating Revenues by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Electric | $97,886 | $99,173 | $210,147 | $206,916 | | Natural gas distribution | $206,794 | $201,445 | $746,041 | $660,930 | | Pipeline | $46,507 | $43,851 | $69,831 | $64,883 | | Other | $(1) | $2 | $— | $17 | | Total External Operating Revenues | $351,186 | $344,471 | $1,026,019 | $932,746 | - Remaining performance obligations at June 30, 2025, totaled $573.3 million, with $87.0 million expected to be recognized within 12 months[59] Note 9. Regulatory assets and liabilities Regulatory assets and liabilities stem from regulated operations, deferring costs and revenues for future rate recovery or refund, resulting in a net regulatory liability of $(151.376) million - Regulatory assets and liabilities are recognized when costs or revenues are expected to be recovered from or refunded to customers in future rates[60] Regulatory Assets and Liabilities (in thousands) | Category | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Total regulatory assets | $451,046 | $569,156 | $537,786 | | Total regulatory liabilities | $602,422 | $619,901 | $596,337 | | Net regulatory position | $(151,376) | $(50,745) | $(58,551) | - Approximately $177.2 million of regulatory assets at June 30, 2025, were not earning a rate of return but are expected to be recovered from customers[62] - Environmental compliance costs and revenues from emission allowance sales are deferred as regulatory assets and liabilities, respectively, and passed through to customers[63] Note 10. Environmental allowances and obligations The natural gas distribution segment acquires environmental allowances for GHG compliance, recording them at weighted average cost, with related expenses and revenues deferred as regulatory assets and liabilities - Environmental allowances are acquired to comply with state GHG emission regulations and are recorded at weighted average cost[65] - Environmental compliance obligations are measured based on allowances held and estimated additional allowances needed[66] - Revenues from selling emissions allowances are deferred as regulatory liabilities, and associated expenses are deferred as regulatory assets[67][68] Note 11. Fair value measurements The Company measures certain investments and available-for-sale securities at fair value, with long-term debt fair value disclosed as Level 2 - Investments in insurance contracts for nonqualified benefit plans are measured at fair value, totaling $64.1 million at June 30, 2025, with net unrealized gains recognized in Other income[70] Available-for-Sale Securities (in thousands) | Security Type | June 30, 2025 Fair Value ($ thousands) | June 30, 2024 Fair Value ($ thousands) | December 31, 2024 Fair Value ($ thousands) | | :--- | :--- | :--- | :--- | | Mortgage-backed securities | $8,167 | $7,612 | $7,554 | | U.S. Treasury securities | $3,467 | $3,860 | $4,024 | | Total | $11,634 | $11,472 | $11,578 | Fair Value Measurements at June 30, 2025 (in thousands) | Asset Type | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | Total ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Money market funds | $— | $8,965 | $— | $8,965 | | Insurance contracts | $— | $64,141 | $— | $64,141 | | Available-for-sale securities | $— | $11,634 | $— | $11,634 | | Total assets measured at fair value | $— | $84,740 | $— | $84,740 | Long-Term Debt Fair Value (in thousands) | Metric | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Carrying amount | $2,181,935 | $2,268,617 | $2,292,610 | | Fair value | $1,886,060 | $1,955,677 | $1,963,396 | Note 12. Debt The Company and its subsidiaries complied with all debt covenants at June 30, 2025, with long-term debt decreasing to $2.182 billion due to repayments - Company and subsidiaries were in compliance with all debt covenants at June 30, 2025[80] Long-Term Debt Outstanding (in thousands) | Debt Type | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Senior Notes | $1,947,000 | $1,882,000 | $1,947,000 | | Credit agreements | $100,800 | $99,800 | $169,700 | | Term Loan Agreements | $61,600 | $124,300 | $65,600 | | Commercial paper | $43,300 | $133,700 | $81,400 | | Medium-Term Notes | $35,000 | $35,000 | $35,000 | | Other notes | $338 | $354 | $346 | | Less unamortized debt issuance costs | $(6,103) | $(6,537) | $(6,436) | | Total long-term debt | $2,181,935 | $2,268,617 | $2,292,610 | | Less current maturities | $(136,700) | $(61,608) | $(161,700) | | Net long-term debt | $2,045,235 | $2,207,009 | $2,130,910 | Note 13. Cash flow information Cash interest expenditures decreased to $49.407 million, income taxes paid decreased to $6.225 million, and noncash investing activities included $38.644 million in property additions Cash Expenditures for Interest and Income Taxes (in thousands) | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Interest, net | $49,407 | $55,258 | | Income taxes paid, net | $6,225 | $7,170 | Noncash Investing and Financing Transactions (in thousands) | Metric | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Right-of-use assets obtained in exchange for new operating lease liabilities | $500 | $820 | $1,787 | | Property, plant and equipment additions in accounts payable | $38,644 | $45,981 | $36,820 | Note 14. Business segment data The Company operates three reportable segments—electric, natural gas distribution, and pipeline—with the CEO reviewing segment performance and resource allocation - Company's reportable segments are electric, natural gas distribution, and pipeline, based on internal reporting and CODM review[85][86] - Electric segment generates, transmits, and distributes electricity in Montana, North Dakota, South Dakota, and Wyoming[87] - Natural gas distribution segment distributes natural gas in those states, as well as in Idaho, Minnesota, Oregon and Washington, and provides related value-added services[87] - Pipeline segment provides natural gas transportation and underground storage services primarily in the Rocky Mountain and northern Great Plains regions[88] - The 'Other' category includes Centennial Capital, captive insurance activities, and corporate overhead costs not meeting discontinued operations criteria[89] Net Income (Loss) by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Electric | $10,497 | $15,527 | $25,441 | $33,396 | | Natural gas distribution | $(7,356) | $(5,007) | $37,302 | $35,063 | | Pipeline | $15,417 | $17,259 | $32,627 | $32,317 | | Other | $(4,778) | $32,657 | $375 | $60,558 | | Consolidated Net Income (Loss) | $13,780 | $60,436 | $95,745 | $161,334 | Note 15. Employee benefit plans The Company maintains qualified defined benefit pension and postretirement plans, with net periodic pension cost increasing to $1.703 million and a net credit for other postretirement plans Components of Net Periodic Benefit Cost for Pension Plans (in thousands) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Interest cost | $3,303 | $3,200 | $6,606 | $6,400 | | Expected return on assets | $(3,645) | $(4,028) | $(7,290) | $(8,056) | | Amortization of net actuarial loss | $1,194 | $1,037 | $2,387 | $2,074 | | Net periodic benefit cost | $852 | $209 | $1,703 | $418 | Components of Net Periodic Benefit Credit for Other Postretirement Plans (in thousands) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Net periodic benefit credit | $(1,118) | $(1,193) | $(2,237) | $(2,361) | - Net periodic benefit cost for nonqualified defined benefit plans was $1.4 million for the six months ended June 30, 2025[98] Note 16. Regulatory matters The Company actively manages regulatory matters, including rate adjustments and recurring mechanisms, with recent approvals and requests across various jurisdictions - Intermountain filed a request for a $26.5 million annual natural gas general rate increase (8.6%) with the IPUC on May 30, 2025[100] - Montana-Dakota filed an annual update to its transmission cost adjustment rider with the NDPSC, requesting to recover $6.3 million, an increase of $7.2 million over current rates[101] - MTPSC approved an interim natural gas rate increase of $7.7 million for Montana-Dakota, effective February 1, 2025, with a settlement agreement for an annual increase of $7.3 million pending[102] - WUTC approved multi-party settlement for Cascade's natural gas rate increases of $29.8 million (7.9%) effective March 1, 2025, and $10.8 million (2.6%) effective March 1, 2026[103] - WYPSC approved a settlement for Montana-Dakota's natural gas rate increase of $2.1 million (11.7%) effective August 1, 2025[104] - Montana-Dakota filed a request with the WYPSC for an electric general rate increase of $7.5 million (24.4%) on June 30, 2025[105] Note 17. Commitments and contingencies The Company accrues for probable and estimable losses from claims and lawsuits, with total accrued liabilities of $25.0 million and purchase commitments of $987.6 million - Accrued liabilities for contingencies (litigation, regulatory, environmental) totaled $25.0 million at June 30, 2025, with related regulatory assets of $22.3 million[107] Purchase Commitments (in thousands) | Period | 2026 ($ thousands) | 2027 ($ thousands) | 2028 ($ thousands) | 2029 ($ thousands) | 2030 ($ thousands) | Thereafter ($ thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Purchase Commitments | $987,600 | $269,400 | $178,000 | $138,200 | $112,600 | $654,800 | - Purchase commitments decreased from the 2024 Annual Report due to an anticipated decrease in electric supply contracts from the Badger Wind, LLC purchase and sale agreement[109] - The Company has outstanding letters of credit aggregating $3.2 million and surety bonds of $11.4 million at June 30, 2025[111][112] - The Company is not the primary beneficiary of Coyote Creek, a VIE, despite a coal supply agreement, due to shared authority among four unrelated owners[116] - The Company's exposure to loss from its involvement with Coyote Creek (VIE) was $24.5 million at June 30, 2025[117] Note 18. Subsequent events Post-June 30, 2025, the One Big Beautiful Bill Act was enacted with no material impact expected, and Intermountain issued $25.0 million in senior notes - The One Big Beautiful Bill Act was enacted on July 4, 2025, extending tax provisions but scaling back clean energy incentives; no material impact expected[118] - Intermountain entered a note purchase agreement on July 15, 2025, to issue $50.0 million of senior notes (6.39% interest, due July 15, 2055), with $25.0 million issued immediately[119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial condition and results, focusing on its transition to a pure-play regulated energy delivery business post-Everus separation - Company's strategy focuses on being a pure-play regulated energy delivery company, pursuing organic growth opportunities[120] - Completed the separation of Everus on October 31, 2024, as a tax-free spinoff, with most separation costs already incurred[121][122] - Board established a long-term dividend payout ratio target of 60% to 70% of regulated energy delivery earnings[123] - Company manages inflationary pressures, higher interest rates, commodity price volatility, and supply chain disruptions[124] Consolidated Earnings Overview This section provides a summary of the Company's consolidated financial performance, highlighting key earnings metrics and drivers Consolidated Earnings Overview (in millions, except per share amounts) | Segment/Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Electric | $10.4 | $15.5 | $25.4 | $33.4 | | Natural gas distribution | $(7.4) | $(5.0) | $37.3 | $35.0 | | Pipeline | $15.4 | $17.3 | $32.6 | $32.3 | | Other | $(4.3) | $(7.6) | $1.3 | $(5.7) | | Income from continuing operations | $14.1 | $20.2 | $96.6 | $95.0 | | Discontinued operations, net of tax | $(0.4) | $40.2 | $(0.9) | $66.3 | | Net income | $13.7 | $60.4 | $95.7 | $161.3 | | Basic EPS - Total | $0.07 | $0.30 | $0.47 | $0.79 | - Consolidated earnings decreased by $46.7 million (3 months) and $65.6 million (6 months) primarily due to the absence of income from discontinued operations in 2025[130][131] - Electric business earnings decrease was largely the result of higher operation and maintenance expense, primarily due to increased payroll-related costs, higher contract services related to electric generation station planned outage-related costs, as well as increased software, which includes certain costs associated with TSA services provided, and insurance expenses[130] - Natural gas distribution business reported an increased seasonal loss, largely the result of higher operation and maintenance expense, primarily due to higher payroll-related costs and increased software expenses, which includes certain costs associated with TSA services provided. Lower volumes due to warmer weather further drove the loss[130] - Pipeline earnings decrease was driven by higher operations and maintenance expense, primarily attributable to payroll-related costs. The absence of proceeds received in 2024 from a customer settlement further drove the decrease[130] Business Segment Financial and Operating Data This section provides detailed financial and operating performance data for each of the Company's business segments Electric and Natural Gas Distribution Both segments strive for top utility performance, facing regulatory, cybersecurity, and clean energy transition challenges while investing in infrastructure and seeking rate adjustments - Segments are focused on cultivating organic growth, managing operating costs, and expanding customer base through system extensions and upgrades[137] - Subject to extensive regulation regarding costs, investment recovery, and permitted returns, with tracking mechanisms implemented to reduce regulatory lag[138] - Electric earnings decreased by $5.1 million (3 months) and $8.0 million (6 months) due to higher O&M, partially offset by rate relief and increased commercial sales[147][148] - Natural gas distribution reported an increased seasonal loss of $2.4 million (3 months) but earnings increased by $2.3 million (6 months) due to rate relief, colder weather, and higher transportation revenue, offset by higher O&M[152] - Utility business expects rate base growth of 7% to 8% annually over the next five years and retail customer growth of 1% to 2% per year[154] - Montana-Dakota entered an agreement to purchase a 49% ownership interest in a 250 MW wind project for $294.0 million, contingent on regulatory approval[158] - An electric service agreement to serve an additional 350 MW data center load with Applied Digital was approved by the NDPSC, with 100 MW expected online in Q4 2025[159] - EPA proposed rules in June 2025 to repeal and replace 2024 GHG emission standards and Mercury and Air Toxics Standard Rule, potentially reducing compliance costs[162][163] Pipeline The pipeline segment focuses on natural gas transportation and storage, pursuing organic growth and system optimization despite price volatility and regulatory challenges - Segment focuses on increasing market share and profitability through optimization of existing operations, organic growth, and investments in energy-related assets[166] - Completed several growth projects in 2024, including Line Section 27 Expansion (175 MMcf/day capacity increase), Line Section 28 Expansion (137 MMcf/day capacity increase), and Wahpeton Expansion Project (20 MMcf/day capacity increase)[170] - Pipeline earnings decreased by $1.9 million (3 months) due to higher O&M and absence of 2024 customer settlement, partially offset by increased demand revenue from growth projects[173] - Pipeline earnings increased by $0.3 million (6 months) due to growth projects and short-term transportation contracts, offset by higher O&M and absence of 2024 customer settlement[175][180] - Bakken natural gas production is at or near record levels, providing organic growth opportunities and increased transportation demand[175] - Began construction in May 2025 on the Minot Expansion Project, adding 7 MMcf/day natural gas transportation capacity, expected in service Q4 2025[179] - Evaluating potential Bakken East Pipeline project (350 miles, 190 MMcf/day capacity) and a smaller Baker Storage Field Enhancement project[185] Other The "Other" category reported decreased net income due to the absence of discontinued operations and income tax adjustments, partially offset by lower O&M expenses Other Segment Net Income (Loss) (in millions) | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(4.7) | $32.6 | $0.4 | $60.6 | - Decreased net income primarily due to absence of income from discontinued operations in 2025 and income tax adjustments[183] - Partially offset by lower operation and maintenance expenses, primarily a result of corporate overhead costs classified as continuing operations allocated to Everus in 2024, which are not included in Other in 2025[183] Intersegment Transactions This section reconciles segment operating revenues to consolidated revenues by detailing intersegment eliminations, totaling $44.0 million for the six months ended June 30, 2025 Intersegment Transactions (in millions) | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $10.2 | $9.1 | $44.0 | $39.5 | | Purchased natural gas sold | $9.8 | $8.8 | $43.1 | $39.1 | | Operation and maintenance | $0.4 | $0.3 | $0.9 | $0.4 | | Other income | $1.2 | $4.4 | $2.3 | $8.9 | | Interest expense | $1.2 | $4.4 | $2.3 | $8.9 | - Intersegment eliminations are applied to reconcile segment operating revenues to consolidated operating revenues[186] Liquidity and Capital Commitments This section discusses the Company's cash flows, capital expenditures, and financing strategies, outlining its liquidity and future capital needs Cash flows Operating cash flows increased by $33.3 million, investing cash used decreased by $61.6 million, and financing cash used increased by $120.4 million Net Cash Flows (in millions) | Activity | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Variance ($ millions) | | :--- | :--- | :--- | :--- | | Operating activities | $334.9 | $301.6 | $33.3 | | Investing activities | $(174.4) | $(236.0) | $61.6 | | Financing activities | $(168.6) | $(48.2) | $(120.4) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(8.1) | $17.4 | $(25.5) | - Increase in operating cash flows driven by collection of purchased gas cost balances at natural gas distribution business[190] - Decrease in investing cash used due to lower capital expenditures and absence of discontinued operations[191] - Increase in financing cash used due to lower issuance and higher repayment of long-term debt[192] Capital expenditures Capital expenditures for the first six months of 2025 were $179.4 million, with estimated full-year expenditures of $539.0 million focused on utility and pipeline growth - Capital expenditures for the first six months of 2025 were $179.4 million, compared to $231.3 million in 2024[193] - Estimated capital expenditures for 2025 are approximately $539.0 million, comparable to the 2024 Annual Report[193] - Planned investments include electric transmission, natural gas delivery, power generation, and modernization of utility infrastructure, as well as pipeline system growth[194] Capital resources The Company's capital resources include credit facilities, debt, and equity, maintaining investment-grade credit ratings and 56% equity as a percent of total capitalization - Primary cash sources are revolving credit facilities, the issuance of long-term debt and the sale of equity securities[196] - Company and subsidiaries had investment grade credit ratings and were in compliance with all debt covenants at June 30, 2025[197] Outstanding Revolving Credit Facilities at June 30, 2025 (in millions) | Company | Facility Limit ($ millions) | Amount Outstanding ($ millions) | Letters of Credit ($ millions) | Expiration Date | | :--- | :--- | :--- | :--- | :--- | | Montana-Dakota Utilities Co. | $200.0 | $43.3 | $— | 10/18/28 | | Cascade Natural Gas Corporation | $175.0 | $14.0 | $2.2 | 6/20/29 | | Intermountain Gas Company | $175.0 | $86.8 | $— | 6/20/29 | | MDU Resources Group, Inc. | $200.0 | $— | $1.0 | 5/31/28 | - Total equity as a percent of total capitalization was 56% at June 30, 2025, indicating financial strength[201] - Intermountain entered an agreement to issue $50.0 million in senior notes (6.39%, due 2055), with $25.0 million issued on July 15, 2025[202] Material cash requirements The Company's material cash requirements encompass short-term and long-term obligations for debt, interest, operating leases, purchase commitments, and asset retirement - Short-term cash requirements include debt repayment, interest, operating leases, purchase commitments, and asset retirement obligations[204] - Long-term cash requirements are similar, covering outstanding borrowings, interest, operating leases, purchase commitments, and asset retirement obligations[205] - No material changes in contractual obligations for 2025, except for decreases in purchase commitments due to anticipated electric supply contract reductions[203] Defined benefit pension plans The Company maintains noncontributory qualified defined benefit pension plans, with an expected $3.4 million contribution in 2025 to decrease costs - Company has noncontributory qualified defined benefit pension plans[206] - Expects to contribute approximately $3.4 million to pension plans in 2025, accelerated to decrease costs[207] New Accounting Standards Refer to Note 2 of the Notes to Consolidated Financial Statements for information on new accounting standards - Refer to Note 2 for information on new accounting standards[208] Critical Accounting Estimates Critical accounting estimates include goodwill impairment, regulatory asset recovery, pension/postretirement costs, and income taxes, with construction contract revenue no longer critical post-Everus separation - Critical accounting estimates include goodwill impairment, regulatory asset recovery, pension/postretirement benefit costs, and income taxes[209] - Construction contract revenue recognition is no longer a critical accounting estimate after the Everus separation[209] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the Company's market risks compared to those reported in the 2024 Annual Report - No material changes in market risks from the 2024 Annual Report[210] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2025[211] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[212] Part II -- Other Information This section covers legal proceedings, risk factors, equity security sales, and other miscellaneous information relevant to the Company Item 1. Legal Proceedings No material changes occurred in the Company's legal proceedings compared to those reported in the 2024 Annual Report - No material changes to legal proceedings from the 2024 Annual Report[214] Item 1A. Risk Factors The Company reiterates 2024 Annual Report risk factors, emphasizing potential negative impacts from tariffs and trade policy changes on costs and operations - Refers to risk factors in the 2024 Annual Report for potential material harm to business[215] - Tariffs and changes in trade policy could increase raw material costs, cause supply chain disruptions, and delay capital projects[216] - Inability to recover increased costs through rates could adversely affect financial condition and results of operations[216] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company purchased 1,833 common shares for non-employee directors electing stock in lieu of cash retainers, with no publicly announced repurchase plans Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | April 1 through April 30, 2025 | — | $— | — | — | | May 1 through May 31, 2025 | — | $— | — | — | | June 1 through June 30, 2025 | 1,833 | $16.58 | — | — | | Total | 1,833 | $16.58 | — | — | - Shares purchased for non-employee directors electing stock in lieu of cash retainer[218] - Company does not have publicly announced plans to repurchase equity securities[219] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted or terminated by directors or officers during Q2 2025[220] Item 6. Exhibits This section refers to the Exhibits Index, listing documents incorporated by reference or filed, including certifications and XBRL documents - See the Exhibits Index for a list of documents incorporated by reference or filed herewith[221] Exhibits Index This section provides a comprehensive list of all exhibits accompanying the report, including corporate documents and certifications - Includes Amended and Restated Certificate of Incorporation, Bylaws, and Long-Term Performance-Based Incentive Plan[223] - Contains certifications of Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Act[223] - XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are included[223] Signatures This section contains the official signatures of the Company's authorized officers, certifying the accuracy of the report - Report signed by Jason L. Vollmer (CFO) and Stephanie A. Sievert (Chief Accounting and Regulatory Affairs Officer) on August 7, 2025[227]